Problems We Solve

Revenue Recognition

Many CFOs, controllers, and finance VPs recognize revenue today based on incomplete, inaccurate, or low-quality data, which often results in incorrect financial reporting, imperfect sales execution and incorrect commission payments, among other challenges. Failure to recognize revenue in the appropriate time frames and amounts can also put your company at significant risk of regulatory penalties.

Generally, revenue is either recognized when products are delivered to distributors (sell-in) or when distributors resell products to end-users (sell-through).

It is becoming more common for channel-centric companies to recognize revenue on a sell-through basis, because revenue is not considered earned as long as the distributor retains the right to return the goods, or the sale price is not “fixed and determinable.”

The rules of sell-through revenue recognition come into play when there are rights of return (SFAS 48), stock rotation rights or when back-end rebates or co-op / MDF payments reduce revenue (EITF 01-09). When products and services are bundled together under a single SKU or invoice, multiple-element revenue recognition (EITF 00-21) and Vendor Specific Objective Evidence (VSOE) rules can apply.

Other revenue-recognition rules and guidelines dictated by the AICPA, FASB, PCAOB and SEC, such as SOP 81-1, SOP 97-2, SOP 98-9, SAB 101, all demand increasing diligence from accounting staff to ensure compliance and to be audit-ready.


"We reduced POS and sales credit processing time over 90% almost immediately after going live. We took a cost center and turned it into a vehicle for improving revenue.”   

- Ken Cuprynski, Director of Worldwide Sales Finance

Existing Systems and Manual Processes Present Challenges

Unfortunately, the majority of existing ERP and accounting software packages don’t accommodate the complex revenue management and compliance needs for sell-through revenue recognition. This forces companies to manage revenue recognition activities outside their standard financial systems by using complicated spreadsheets and manual processes. Since these approaches are error-prone and not scalable, setting up effective controls for risk mitigation end up being an even bigger challenge.

Entomo's Single Automated System With Audit Trails

Entomo addresses the problems of revenue recognition by eliminating complex spreadsheets and ad hoc databases, and replacing them with a single integrated system. Entomo makes it easy to manage complex channel revenue models that are challenging for traditional accounting systems, especially when it comes to managing deferred revenue. All revenue-related information are aggregated, interlinked and stored in a single system with built-in audit trails and automatically enforced controls. Audit and analytics processes are quick, easy and always based on automatically processed high-quality data. Importantly, Entomo provides automated functionality to meet stringent SEC and FASB guidelines on sell-through revenue recognition right out-of-the-box. This substantially simplifies your ability to meet Sarbanes-Oxley (SOX) and mitigate compliance risks.

Entomo’s SmartHub® provides an end-to-end channel revenue management system:

  1. Multi-Source Transaction Collection, Cleansing and Normalization
  2. Channel Data Reconciliation and Adjustments
  3. Net Revenue Valuation
  4. Automated Generation of Journal (G/L) Entries
  5. Revenue Analytics and Forecasting
  6. Audit and Contract Compliance

These functions are enabled through Entomo's Channel Data Management and Channel Revenue Management Suites, including the Transaction ValuationSISO Reconciliation, and Sell-Through Revenue Recognition modules.


Key benefits include:

  • Accurate, timely sell-through revenue recognition
  • Full transparency and audit trail
  • Automated, cleansed, enriched data collection
  • Elimination of manual processes and systems
  • Compliance with SEC, FASB and SOX guidelines
  • Business intelligence analytics for strategic planning

Entomo’s team of channel-management consultants provide best practice-based guidance on implementing all processes to ensure that revenue recognition and management practices throughout the channel are compliant and fully documented.


1. SFAS 48: Now specifically covered by FASB Accounting Standards Codification™ (ASC) Topic 605-15-25. Topic 605-15 can be referred to for general guidance.
2. EITF 0109: ASC Topic 605-50.
3. EITF 00-21: ASC Topic 605-25.
4. SPO 81-1: ASC Topic 605-35.
5. SOP 97-2, SOP 98-9 and SAB 101 are covered by ASC Topic 985-605
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